Friday, May 27, 2016

I think the Fed will hike.

Last year I was convinced that the Fed would never raise in an election year. Six months later, inflation is really starting to build up and now I've changed my mind. I've talked about the crazy housing pressures before. But really what makes me convinced is the price of oil. I don't think oil deserves to be where it is because we are still at record stockpiles. But sometimes there is the way you want things to be, (or expect them to be) and then there is the way things are.

Anyway - oil is up about 70% since it's lows? This is inflationary. It will just take a few months to work it's way through. It took more than a year and a half for the decline in oil to work it's way through. And we'll probably start seeing it show up somewhere in Summer. The dollar is less than 5 cents from it's high. I think it will move sideways. It will take some very big circumstances to get it to go much stronger. I'm telling you, inflation is now your dark shadow.

It is exceedingly hard to make deflation in an advanced economy. It somewhat goes against human nature. Inflation has been the norm about 80% of the time in history. Deflation is the is the outlier. There is a ton of money buried in peoples back yards. One day...... they are going to feel safe enough to dig it out. I think that day is getting closer and closer. And if Trump were to win, I think inflation could be a fire. This administration has suppressed people's natural impulses for 8 years. I think there is going to be a be a mesmerizing snap back.

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